Re-examining the issue of local content

Local content has been a key issue for the Energy Chamber ever since I joined the organisation thirteen years ago. Unfortunately, it seems be an issue a bit like the elusive “diversification”; something we spend a lot of time talking about but making very little progress towards achieving.

The overall objective of local content seems straight forward and increasing local content is an obvious overall national policy objective. The much-delayed Public Procurement Act defines local content as “The value added to goods, works and services measured as the amount of money remaining in Trinidad and Tobago after the production of the good or performance of the works or services”. Maximising value retained in country is an obvious policy objective and one that seems even more important given the current shortages of foreign exchange.

Last year the Energy Chamber adopted this definition of local content thereby aligning the Energy Chamber with the official national definition adopted by Parliament. But that is the easy part. How do you go about making sure that there are policies and programmes in place that achieve this objective? That is the issue that I have been struggling with for the past thirteen years.

Over time I have got less and less sure about what are the right policy measures to achieve this objective. I do not think that there are easy legislative measures that can be simply introduced to mandate increased local content.

When I look at the massive corruption that has been spawned by local content legislation in places like Brazil, Angola and Nigeria, I balk at the possible unintended consequences of legislation in Trinidad & Tobago. Do we really have the track-record and enforcement systems in place to ensure that local content law does not just become a route for a few well-connected individuals to seek personal enrichment by “fronting” for international companies? I’d hate to be involved in a process that enriched a few individuals without doing anything for the overall sustainable development of the economy.

I am not saying that regulation does not have a role to play, but I think that it needs to be sophisticated regulation that has been very carefully thoughtout and thoroughly researched. It is not necessarily local content legislation that we need, but perhaps other measures such as tax laws, employment laws, professional certification regulations or industry standards that can help meet the overall objective of local content.

Production sharing contracts and other agreements already contain local content provisions and much more needs to be made of these existing measures. Monitoring these existing measures and evaluating progress towards achieving objectives is crucial.

There is a key role here for a properly resources governmental agency with a clear mandate to undertake this research, monitoring and evaluating role. I hope that the secretariat to support the Permanent Local Content Committee (PLCC) will become this agency. Without this the PLCC will flounder, as it did before.

State-owned enterprises have a crucial role to play in promoting local content. In Norway, the state-owned oil and gas company played a key role in encouraging the development of local oilfield companies, with a focus on new technology. These companies are now exported around the world.

We need a genuine dialogue with industry about what is possible and what can be done to ensure that more value is retained in country. Local content means much more than just having more locallyowned service companies doing business with the multi-national operators. It is not about companies getting a “slice of the pie” just because they are owned by a Trinidadian shareholder. It has to be about the sustainable development of our industry and creating a strong and vibrant local industry able to compete with the world.

We need a new focus to our local content discussions or we are going to be forever talking and achieving nothing.